Megatherm Induction Limited

Sector n/a · NSE

₹369.25−₹4.15 (−1.11%)

DalalBaazaar Score

57 / 100

🟡 Moderate

Verdict

NEUTRAL

Risk

Moderate

Driven by negative free cash flow, micro-cap size, which brings thin liquidity.

In simple words: Strong business and financial position, with modest growth. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:02 pm

Understanding the Business

The 60-second version of Megatherm Induction Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

How does it make money?

Turns over ₹345 Cr a year. Of every ₹100 of sales, about ₹7 reaches shareholders as profit, with ₹11 left at the operating level before interest, tax and depreciation.

What is its competitive advantage?Some evidence

ROCE of 18.2% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

What has been driving growth?

Sales and margins have both contributed to where profit is now. Over 3 years revenue moved +30% while net margin moved +30% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+30%

Margin effect+30%

DalalBaazaar Score

57/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✓ Profits have been consistent from year to year
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

60/ 100

Average

How good the business is, ignoring the share price entirely.

Valuation

35/ 100

Expensive

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

vs. its own history

Not enough price and earnings history

vs. sector peers

Not enough peers with a usable P/E

vs. generic bands

No P/E available

EV/EBITDA

18.4x

PEG

—

What's Good / What's Bad

🟢 What's Going Well2

Very low debt
Debt/Equity of 0.30x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Return on equity is falling
ROE has dropped from 27.7% to 14.3% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 32.9% to 18.2% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 1 high · 3 watch

🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹11 Cr in the latest year.
🟡Receivables growing faster than salesFinancial
Receivables up 62% against revenue up 30% — sales are being booked faster than they are collected.
🟡Inventory building faster than salesFinancial
Inventory up 78% against revenue up 30% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 18.2% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Sales are being booked faster than collected
Receivables are up 62% against revenue up 30%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
Returns on shareholder capital are falling
ROE has dropped from 27.7% to 14.3%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 9%✓ 10.9%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹11 Cr
Profit that never becomes cash eventually stops being profit.
3Revenue growth stays above 7% a year✓ 9.3% CAGR
Latest reported year was 8.1%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
4Debt / EBITDA stays below 2x✓ 1.3x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 15%✓ 18.2%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

6 / 9 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

3 good · 7 neutral · 1 weak

Market Cap

₹696 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

Not available

No data

Source didn't return this field

P/B Ratio

Not available

No data

Source didn't return this field

EPS (TTM)

Not available

No data

Source didn't return this field

ROE

14.3%

Moderate

Moderate capital efficiency

ROCE

18.2%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.30x

Low

Conservative leverage

Revenue Growth (YoY)

8.1%

Modest

Modest growth

Profit Growth (YoY)

11.1%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹11 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Gross Margin

26.1%

Proxy

Operating margin unavailable — showing gross margin instead

Net Margin

6.9%

Average

Average bottom-line conversion

Current Ratio

1.41

Comfortable

Healthy short-term liquidity

Technical Snapshot

SMA 20 / SMA 50

252.7 / 232.2

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

67.9

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹265 Cr	₹305 Cr	₹319 Cr	₹345 Cr	+9.3%
EBITDA	₹25 Cr	₹35 Cr	₹36 Cr	₹38 Cr	+14.0%
EBITDA Margin	9.6%	11.4%	11.4%	10.9%	—
PAT (Net Profit)	₹14 Cr	₹21 Cr	₹21 Cr	₹24 Cr	+19.1%
EPS	₹7.43	₹14.13	₹11.31	—	—
ROE	27.7%	17.2%	15.0%	14.3%	—
ROCE	32.9%	23.3%	20.8%	18.2%	—
Total Debt	₹43 Cr	₹36 Cr	₹33 Cr	₹49 Cr	+4.9%
Free Cash Flow	₹7 Cr	₹10 Cr	-₹3 Cr	-₹11 Cr	—

🟢 Revenue has grown at 9.3% a year over 3 years.

🟢 EBITDA has grown at 14.0% a year over 3 years.

🟢 EBITDA Margin has risen from 9.6% to 10.9% over 3 years (+1.3 pts).

🟢 PAT (Net Profit) has grown at 19.1% a year over 3 years.

🔴 ROE has fallen from 27.7% to 14.3% over 3 years (-13.3 pts).

🔴 ROCE has fallen from 32.9% to 18.2% over 3 years (-14.7 pts).

🔴 Total Debt has grown at 4.9% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹7 Cr to -₹11 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹344 Cr

Total Liabilities

₹179 Cr

Cash & Equivalents

₹55 Cr

Operating Cash Flow

₹5 Cr

Capex

-₹17 Cr

Recent News

1 mixed5 general

Compare with

Equitymaster, 09 Oct

Megatherm Induction (NSE:MEGATHERM) Has A Pretty Healthy Balance Sheet

Simply Wall Street, 18 Nov

Megatherm Induction Limited: Promoters Submit Non-Encumbrance Declarations for FY26 Under SEBI Takeover Regulations

scanx.trade, 07 MayM&A

🟡Mixed / dependsAcquisitions change the balance sheet before they change the earnings. Look at what was paid, how it was funded, and whether debt rose.

Compare with

Equitymaster, 08 Oct

MEGATHERM Stock Price and Chart — NSE:MEGATHERM

TradingView, 19 Feb

Compare with

Equitymaster, 09 Oct

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.
Sector/industry classification unavailable — verify manually for peer comparison.
3 metrics couldn't be retrieved for this stock — this is more common for smaller or thinly-covered listings.

DalalBaazaar Thesis

StrongFinancial Health · Growth

MiddlingProfitability · Valuation

WeakBusiness Quality · Risk

Points for each in the Score ↑

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 1 high-severity red flag sits above this conclusion and should be read first.

1 of 5 tripwires tripped — Free cash flow remains positive · see Key things to watch ↑